Canada’s Institute of Chartered Accounts (CICA) has submitted a report summarizing their views on the impact of contingency fees on the Scientific Research and Experimental Development (SR&ED) program. CICA has found that contingency-based fee arrangements are a vital component of Canada’s tax incentive system for promoting SR&ED.

Amongst their key findings were that:

As per a poll of Canada’s 7 largest professional services firms, the portion of the SR&ED credits paid to firms’ preparers under contingency-based arrangements is a nominal 2.3% of the SR&ED program’s annual $3.6 billion cost.

When compared to hourly-based or flat fees, contingency-based fees were comparable to fixed fee and hourly rate fee engagements of equivalent scope. Contingency-based fees are estimated to be on average 58% of standard billing rates.

Almost half of those who had paid contingency-based fees would have likely not made a SR&ED claim under an alternative fee arrangement.

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Administered by Canada Revenue Agency (CRA), the Scientific Research and Experimental Development (SR&ED or SRED) Program is a $3.5 billion business incentive program to encourage research and development in Canada.

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